Babcock shareholders to be wiped out

Babcock & Brown says there would be nothing left for shareholders after its lenders take their cut under a plan the debt-laden investment company is discussing with its bankers.

"The board believes that in the current market environment and based on continuing discussions with the banking syndicate there will be no value for equity holders under the revised business plan balance sheet restructure,'' the Sydney-based company said in a statement.

Babcock also said there would be negligible or no value for the holders of subordinated notes.

Babcock shares become almost worthless last year as the company struggled to refinance $9 billion in debt, closing at a record low of 15 cents on December 30, having fallen from over $20 the year before.

On January 7, Babcock announced that it had a negative net asset position as of December 31, and said it had submitted a business plan to the 25-bank syndicate of financiers.

The next day, Babcock shares went into a trading halt, having closed at 32.5 cents.

Babcock said at the time that any agreement with the lenders would significantly dilute existing shareholders' equity.

The investment company now expects to make an announcement regarding the outcome of the current discussions late next week or early the following week.

The company has to pay down corporate debt of $2.8 billion and $6.4 billion of limited recourse debt, as well as a $150 million loan secured on December 5.

The banks' verdict on the revised business plan will determine whether Babcock will be saved from insolvency.

"The banks are realising that the best people to manage the show, even if they haven't managed it that well, are the incumbents, rather than an administrator,'' Mr Heffernan said.

"It's probably better for the whole environment that companies don't go to the wall.

"And in the end, they may benefit from it, although that's taking a long term view.''

The banking syndicate is dominated by European institutions, with Australia's four major banks holding aggregate exposure estimated about $800 million.

The firm said its books would show a "substantial negative net asset position'' as at December 31, when it reports its full year results, scheduled for February 26.